Northern Rock End of Mortgaged Deal (Merged Threads)

picardygirl

MascaraMinx wrote: »

But surely this applies regardless of whether you are with NRAM or the other part of the business? The scary part is to be with Northern Rock at all, regardless of this new separation of business entities?



I'm in the same position as you, high LTV, unable to get another deal. We have a reasonably high joint income and very secure jobs, so it's not like we are a huge risk, but we can't move from NR unless someone starts offering a 90% LTV mortgage for remortgagors. However, I am thinking that perhaps with NRAM being government owned and not a competitive bank, it will be in their interest not to have repossessions and bankrupting people left right and centre? Surely they know it's risky debt which is why it's been taken on.

Or is this too simplistic a view?

MascaraMinx ..... you may be right, thats just my gut instinct ..... I hope you ar right about NRAM interest to keep their SVR at a competitive rate as its goverment owned etc etc .....

itsecman

picardygirl wrote: »

MascaraMinx ..... you may be right, thats just my gut instinct ..... I hope you ar right about NRAM interest to keep their SVR at a competitive rate as its goverment owned etc etc .....

The idea of the "BAD" Bank is that it will be used to pay back the government loan, and then be wound down. I can't see them wanting that to take 20 to 30 years. I imagine that they will want to get rid off the outstanding mortgages quickly and so will try to encourage us to move them elsewhere. Best way to do that........increase the interest rate!

Paza02

That could have the opposite effect and lose them money if home owners get into trouble

zipman23

itsecman wrote: »

The idea of the "BAD" Bank is that it will be used to pay back the government loan, and then be wound down. I can't see them wanting that to take 20 to 30 years. I imagine that they will want to get rid off the outstanding mortgages quickly and so will try to encourage us to move them elsewhere. Best way to do that........increase the interest rate!

If you don't have enough money to put down as a deposit to move to another lender and are stuck above a 90% LTV, for example, how will increasing the SVR "encourage" people to move on? Increasing the rate to higher than what people can afford will result in missed payments and people falling behind = knock on effect!

Keith

Got my letter today and reading it through it made me realise, although AM aren't offering new products, NR will be. AM are a seperate entity now so surely if NR have a good product you can remortgage your AM mortgage to NR?

beanielou

If you meet their criteria Keith Im sure that you can.

MarkyMarkD

I'm afraid that your logic that NRAM should charge its customers low rates, to reduce the risk of them getting into payment difficulties, holds no water at all.

Say that NRAM charged an SVR of 6% and that it has 100 customers who all pay perfectly - it earns 6% of its balances each year.

If instead it charges an SVR of 8%, and this causes 5% of its customers to default and be repossessed, and 90% of those customers have an LTV (prior to repossession) of 100% or less and the other 10% have an LTV of say 125%. Allowing for 25% realisation costs, build-up of arrears prior to repossession etc., they might realise 75% on the 100% cases and 60% on the 125% cases.

That means that they lose (90% x 5% x 25%) + (10% x 5% x 40%) of balances = 26.5% of the 5% = 1.325%.

So, it's increased its income by 2%, and increased its losses by 1.325% of balances. And meanwhile, it's earned £millions in arrears fees on all the accounts which couldn't meet their higher payments.


Of course, it's nowhere near that simple. NRAM (and all of NR) already has higher levels of arrears and defaults than most other lenders. So, by increasing rates, it will make things worse, but not that much worse. The least able-to-pay customers already cannot manage it before they revert to SVR.

And, as very wisely pointed out earlier on this thread, the goverment needs cash - desperately. The best way to get money out of NRAM is to get customers to remortgage away - and leaving them on an attractive SVR - or even one which is "just about OK" won't get people to remortgage away.

Mips

I am worried because the house is in negative equity and my husband went bankrupt.. he is now discharged.. but if we had to rely on a sub-prime lender.. we couldn't afford mortgage repayments.


We are on 4.99 right now but I reckon in 12 months SVR will be higher than this

Somerset

itsecman wrote: »

The idea of the "BAD" Bank is that it will be used to pay back the government loan, and then be wound down. I can't see them wanting that to take 20 to 30 years. I imagine that they will want to get rid off the outstanding mortgages quickly and so will try to encourage us to move them elsewhere. Best way to do that........increase the interest rate!

Agreed, I think they'll screw us on the SVR. They've got no incentive not to (normally to retain good business) - in fact they've got every incentive to aggrevate us as much as poss (reduce book/force re-mortgage away/raise funds).

A bit of a depressing scenario !

Personally (and I realise different ppl/different situations ) the only small positive, and I think it's highly unlikely, is that now they are almost considered a sub-prime lender, they theoretically could offer incentives to leave (other sub-primes have). But they won't, as it's all taxpayers money and they'll let the book run down naturally first ie those that can leave, will.

dickovski

I think we have been stitched up right royally on this. My position isn't so bad but I feel sorry for a lot of people on here.

I have a slightly different problem to ponder. My 5 year deal comes to an end Sept 2010. I have
50k on 4.89% repayment - 13 years left
60k on 4.89% interest only - 13 years left
16k on 3.94% secured loan - 7 years left

The good problem is I have come into a 40k lump sum which I want to put towards the mortgage. Do I pay off a load now and if so which part (I'm guessing the interest only). Or do I wait until my deal comes to an end and use it as leverage to get a better deal.

The bad part is I doubt I would get a new deal anywhere as although I have never defaulted my wage multiple wouldn't be anywhere near what most banks require even with the 40k taken off.

Any advice welcome.